Some 1,500 condominium units in Greater Downtown Miami were sold from April to June this year, reported an associate of mine, Peter Zalewski, a principal with Condo Vultures LLC in Bal Harbour, Fla.

All those units represented 1.8 million square feet and reduced the number of new condos under developers’ control to a mere 5,100 units.

About the only disquieting news in all of Condo Vultures’ data was that gross sales amounted to $584 million, or just $333 per square foot. The reason for the low pricing was that most of those units were sold at bulk sales. Or as Jay Steinman, a Miami attorney who has been in the middle of many condo sales, said, "That would be one guy buying 200 units, another buying 50 units, that kind of thing."

The question is: Are bulk condo sales a good thing? The answer is, generally, yes, but it depends on where you live, what you own and how willing your bank is to let you be market-competitive.

Miami isn’t the only city with major bulk condo sales. In 2005, the last year before the real estate downturn, there were only eight bulk condo sales in the country with a value of $162 million, reported Real Capital Analytics. By 2009, the numbers jumped to 84 with a value of $856 million. Through June of this year, bulk condo sales reached 47 with a total value of $918 million.

"We have already hit the full year’s total of 2009 for bulk sales, but I was surprised there (weren’t) even more," said Dan Fasulo, a managing director with Real Capital Analytics.

"So many of these things are caught up in foreclosure or distressed situations that sometimes they get re-capitalized or transferred to a new owner and we don’t see it. Other times, where a lender does a workout, the developer in some cases will lose the entire equity stake and then act as a reseller."

In Greater Miami, bulk condo buyers are paying between 30-40 percent off the height of the marketplace for "A" properties, usually near the intercoastal waterway or oceanfront. Much bigger discounts — 50 percent or more to the height of the market — can be seen with properties further inland.

Mark Pordes, whose company, Pordes Residential in Aventura, Fla., negotiated the largest condo bulk sale in South Florida earlier this year, 146 units on Singer Island in Palm Beach County for $120 million, also did the 25-unit bulk sale at the high-profile Fontainebleau Sorrento in 2009 for $8 million.

"There are two kinds of bulk sales," he explained. "The first is where you take all inventory down, everything that is remaining, and that is a close-out. The other is a carve-out. Let’s say a building has 100 units left to sell, but the developer or lender will do a mini-bulk of, for example, all the remaining two-bedroom units, leaving behind the one-bedroom or three-bedroom units. That’s done so there is no internal competition in selling the remaining units."

Of course, if you were a unit owner in a building going to condo bulk sale, you are going to see the value of your investment reduced. That’s the bad news. On the other hand, your investment will get no appreciation until all the units in your buildings are sold, and that’s going to happen only if the remaining units are recapitalized at a lower price.

The other advantage to an existing condo owner is if you are living in a building with many unsold units, in a worst-case situation homeowners association fees could escalate ridiculously since there are few contributors or your condominium association could go bust.

A second unkind consequence of a bulk sale is the investors will put their newly acquired units back into the market at a percentage of the old market price, and that could put pressure on unit prices in what was once healthier condo buildings in the immediate market area.

This is where things get tricky, so much so that a logjam in condo sales has developed in specific markets.

"A little factor called ‘your lender’ comes into play," said Steinman. "The lender expects to get its debt paid off through condo sales."

If you as an owner want to severely reduce prices, the lender can’t get out of its loan. As a result, the condo seller can reduce unit sale prices only to levels that would be satisfactory to the lender.

"Lenders are saying, ‘I want you to sell at X plus Y so I can get paid off,’ but borrowers/developers are saying I can only sell at X," said Steinman. "That’s why you are seeing so many bankruptcies. The banks are being adamant in that they don’t want the units sold at a low price."

Nevertheless, most observers and participants believe bulk condo sales are a good thing because it sets a clearing price. For about two years, the problem in hard-hit markets was there were few deals because no one knew how to value these empty condos. Every new deal gives a clear indication of what prices should be.

"Everything was at inflated value," said Steinman. "If that unit … originally marketed for $300,000 … is sold at $150,000, all of a sudden the price is meaningful. It is a price that can be financed and for the new owner it is at a price where the unit can be rented at a value that can cover debt service."

Individual buyers following the ping-ponging of condo prices in bulk-sale situations shouldn’t be deceived into thinking they are going to get the same deals.

"If you think a buyer off the street is going to be able to pick up one of these individual units at the same price that an investor who bought 100 units did, forget about it," said Fasulo.

"You can get something in South Florida at a significant discount to the height of the market, but you are not getting the investor discount, which is what many had hoped for and it is creating mass frustration among buyers in the market."

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